Thursday, April 23, 2015

Posted on April 23, 2015

Colleges going bankrupt?
If anyone doubted that the budget debate unfolding at the state Capitol has major long-term implications for Louisiana and its flagship university, Wednesday’s events should have settled the question. As Julie O’Donoghue with Nola.com reports, the LSU flagship campus has begun to prepare the paperwork needed to declare “financial exigency” – basically, college bankruptcy.

Louisiana’s flagship university began putting together the paperwork for declaring financial exigency this week when the Legislature appeared to make little progress on finding a state budget solution, according to F. King Alexander, president and chancellor of LSU. “We don’t say that to scare people,” he said. “Basically, it is how we are going to survive.” Being in a state of financial exigency means a university’s funding situation is so difficult that the viability of the entire institution is threatened. The status makes it easier for public colleges to shut down programs and lay off tenured faculty, but it also tarnishes the school’s reputation, making it harder to recruit faculty and students. “You’ll never get any more faculty,” said Alexander, if LSU pursues financial exigency.

This news, from LSU Chancellor F. King Alexander, came on the same day as we learned that Moody’s Investors Service also recently lowered LSU’s credit rating, meaning it will be more expensive for the university to fund building projects.

Inventory tax plan clears first hurdle

After a false start on Monday, a proposed constitutional amendment to repeal the inventory tax, a local property tax on businesses, cleared the Senate Finance Committee by a vote of 9 to 1 on Wednesday. Senate Bill 177 by Sen. Robert Adley would cost local governments around $500 million in lost revenue, but would also save the state around $450 million, because businesses that pay the tax qualify for a dollar-for-dollar state credit. The bill’s passage now sets in motion a number of revenue-raising bills in the House, under the odd “swimlanes” that legislators are staying in as they try to work with Gov. Bobby Jindal to fill a $1.6 billion budget shortfall. But unspecified plans to make local governments “whole” is causing much consternation, as the Advocate’s Tyler Bridges reports:

“How are we going to fill the bucket?” asked Mike Waguespack, Assumption Parish’s sheriff, in a variation of a question asked repeatedly by the parade of local government officials. No senator could explain how on Wednesday. But state Sen. Robert Adley, R-Benton, the bill’s sponsor, and Finance Committee members assured them time and time again that the Legislature would be sure to find ways to provide local governments with enough money to offset not being able to assess the inventory tax.

The planned revenue switcheroo also raises questions about tax fairness and equity. On Wednesday, it was clear that some saw the fight as one between corporations and homeowners.

The debate over whether to repeal the inventory tax before the Senate Finance Committee revealed a sharp split between the state’s biggest business groups and the local government officials, who repeatedly argued that the state’s budget shortfall is caused by businesses getting too many tax giveaways. “We can’t continue to give it all away,” said Tommy Roussel, who is president of St. James Parish. Roussel and other local government officials said repealing the inventory tax would force them to raise property taxes on homeowners and businesses to make up the lost revenue if they wanted to keep the same level of services — unless the state comes through with an offsetting amount of aid.

Tuition overhaul bills move forwardIn an effort to offset the impact of deep budget cuts to state colleges and universities, committees in both chambers on Wednesday advanced bills to give campuses more autonomy over setting tuition and fees. Melinda Deslatte with the Associated Press has the story:

The House and Senate education committees approved without objection several bills that would remove the Louisiana Legislature from setting tuition and fees, leaving those decisions instead to the college system management boards. The proposals vary … The bills allowing for undergraduate student tuition increases differ in the House and Senate in how they link to the TOPS free college tuition program. The version headed to the House floor would exclude any additional tuition increases from being covered by TOPS. The bill headed to the full Senate is linked to a separate proposal that adds cost controls to TOPS.

As Elizabeth Crisp with the Advocate reports, the Senate approach pairs pair tuition autonomy with more legislative control over the cost of TOPS awards. The bill would set a base amount for TOPS and require a vote to increase it in later years. It won’t be smooth sailing.

Phyllis Taylor, the widow of TOPS founder Patrick Taylor, has long opposed changes to TOPS that could impact students, but she’s supporting Donahue’s plan. “Times change and circumstances change,” she said Wednesday. “We find ourselves today in Louisiana with serious fiscal constraints, and those constraints must be addressed.” But not everyone is on board with the proposal, which squeaked out of committee in a 4-3 vote. Stafford Palmieri, Jindal’s deputy chief of staff, said the administration thinks the change would effectively “disincentivize students” from staying in state for college and break a promise made to them.

Undocumented immigrants pay taxes tooIn Louisiana, undocumented immigrants pay almost $60 million a year in state and local taxes, according to a new report from the Institute for Taxation and Economic Policy. That comes out to 7.8 percent of their total income. By comparison, ITEP notes, the wealthiest 1 percent of households in Louisiana only pay about 4.2 percent of their income to support local schools, roads, public safety and health care.

Number of the Day

$59,850,000 – Estimated state and local taxes paid by undocumented immigrants in Louisiana (Source: ITEP)